Should I Solely Rely On EPF Scheme?

Employee and employer contributions are combined to form an employee provident fund. Under the EPF plan, both the employee and the employer must pay monthly contributions to the EPF scheme. One will be given this amount as an employee if you retire or even if you are unable to work permanently or temporarily owing to a medical condition.

Among wage earners with just an Exempt-Exempt-Exempt status, the EPF offers a tax-free opportunity to invest. Reimbursements are taxable income under Section 80C, and interest earned on investments and withdrawals (including partial withdrawals for certain purposes) are tax-free. To know more about EPF schemes, read on.

Employee Pension Fund (EPF) - Why?

Employees' Provident Fund (EPF) has legislative backing since private enterprises with 20 or more employees are required to contribute a portion of their pay to this retiral saving. As a result, it is one of the most popular retirement savings alternatives.
Following are some important factors focusing on EPF -

1. Despite the fact that interest is calculated monthly, this is only transferred towards the Provident Fund accounts once every year on March 31st of the fiscal year.
2. The deposited interest is applied to the amount for the next month, April, and is then utilised to calculate interest.
3. Without any contributions to an EPF account for 36 consecutive months, the account is declared inactive or inoperative.
   Interest collected on inactive accounts is taxed at the member's slab rate.
4. The employee will not earn interest on employer payments to the Employees' Pension Scheme.

What Are The Benefits of Having EPF?

Following are of the some benefits under EPF -

• Financial Security - Funds put in these accounts cannot be retrieved quickly, hence promoting savings.
• Period Of Retirement - The accrued fund under this programme may be utilised by the employee upon retirement. The retired employee benefits from this in the shape of financial stability.
• Unforeseen Circumstances 
  The employee can access the accrued fund in the event of an emergency. The employee may elect to withdraw his or her funds early. In certain exceptional circumstances, the programme allows for such pre-term withdrawals.
  In the event of the employee's death, the collected money, plus interest, is distributed to the employee's nominee, assisting the family during tough times.
• If somehow the employee seems to be no longer able to work, he or she may use these monies to help him or her get through the tough period.
  In the event of an unexpected layoff or retrenchment from a job, the employee may use this money until he or she finds another appropriate work.
• Loss Of Income - If the person leaves his or her existing work for whatever reason, this money may be utilised to cover expenditures.
• After Retirement
  The company not only provides to the PF account but also makes appropriate payments to the employee's pension, which may be utilised after retirement.
• The legislation also includes rules requiring employers to pay specified contributions toward an employee's life insurance when group insurance coverage is not available. This programme guarantees that employees are adequately covered.
• Exemptions From Taxation - Nevertheless, contributions to the EPF are generally tax free. The employer's contribution to an EPF account is indeed not taxable income. As a result, the employer contribution is tax-free at the point of origin. The employee's contribution, on the other hand, is deducted from his or her taxable income.

Therefore, the EPF system is one of the most extensive and comprehensive savings plans offered to Indian employees.  This programme guarantees that employees are adequately covered.

Should I Solely Rely On EPF Scheme?

Although EPF schemes provide you with a decent return and a set of varied benefits, it is never advised to rely on a single investment instrument. Thus, you must invest in other investment plans. For instance, you can invest in life insurance plans which also provide you with a life cover with wealth creation benefits.

Conclusion

Employee Provident Fund Scheme is one of the most efficient savings schemes in the country which can help you create an investment corpus while working. However, since the size of investment under this scheme is limited, one must invest in other investment instruments as well so that they have enough funds available to them in the times of need.

Also read: All You Need To Know About Retirement Plans

Factors To Consider While Buying A Pension Plan In India